Wednesday 26 June 2013 16.01 EDT
First published on Wednesday 26 June 2013 16.01 EDT

The country's best-known children's hospital imposed a gagging order on one of Britain's leading doctors after she raised concerns about patient safety, triggering rows with managers which led to her departure, it has emerged.

Great Ormond Street Hospital used a confidentiality agreement with Dr Hilary Cass, the leader of the NHS's 11,000 specialists in child health, to settle a long-running dispute with her which saw her demoted in the wake of warning the London hospital's bosses that inadequate staffing was putting patients' safety at risk.

The disclosure has raised fresh worries about the NHS's controversial use of gagging orders to stop staff from drawing attention to issues which they fear are compromising patient care and safety. The health minister, Dr Dan Poulter, earlier this week condemned a culture in the NHS in which he said "again and again, a desire not to face up to the reality of poor care saw institutional secrecy put ahead of patient safety".

Great Ormond Street (GOSH), which has an international reputation for helping children with very serious illnesses, entered into a compromise agreement with Cass – who was a senior doctor there at the time and is now the president of the Royal College of Paediatrics and Child Health – in October 2010. It was reached as part of a settlement of legal action Cass had taken against GOSH alleging constructive dismissal, which also saw her receive a secret payment of £35,000 from the hospital in return for dropping her lawsuit.

Friends say Cass felt she was "hounded out" by the hospital after she emailed senior managers, including chief executive Dr Jane Collins, a detailed account of her concerns that a lack of junior doctors, inability to fill some rotas, poor staff morale and a lack of co-operation between different departments was putting patients at risk.

Within days she found that her responsibilities had become much more limited and, several months later, was demoted her from her dual role as GOSH's deputy medical director and director of medical education. Cass concluded the compromise agreement and agreed the £35,000 payment with GOSH in 2010, a year after she left to work in a senior role at Guy's and St Thomas's NHS hospital trust.

Cass told the Guardian in a statement that she had signed the confidentiality agreement "under duress", but had only done so in order to ensure that she could continue to undertake training at GOSH in children's palliative care so that she could set up a new service offering such care for terminally-ill children.

GOSH was so determined to stop Cass airing her concerns in public that it made clear in the agreement that they would withdraw their support for her doing the training unless she agreed to keep quiet. The hospital now admits that it was wrong both to link the two issues and also to gag her from raising concerns at all.

"Great Ormond Street had made a prior commitment to support my training in palliative care, but then made this support conditional on me signing the agreement." Her duty to "act in the best interests of children" by doing the training meant she accepted the gag.

GOSH – which has a new senior management team in place following Collins's departure last autumn to become chief executive of the charity Marie Curie – said in a statement: "The trust recognises that some clauses in the agreement could be interpreted as restricting what Dr Cass could speak about publicly. In hindsight those clauses should not have been included. No clauses of this nature will be included in any future agreements."

On its support for Cass's palliative care training, it added: "While at the time we believed the agreement was an effective way of enabling both parties to move on and continue to work together, the trust recognises that Dr Cass's continued clinical training at Great Ormond Street Hospital should not have been referenced in the agreement."

A GOSH spokeswoman acknowledged that Cass had raised concerns about patient safety in 2007 but insisted that they were not part of the compromise agreement reached in 2010 and were acted upon. But friends of Cass say that her opposition to Collins's plan to cut 30 of the hospital's 200 junior doctors was a key issue. Only 10 of the planned 30 posts eventually disappeared after she argued for their retention.

GOSH also disputed Cass's claim, made in her legal action, that she had been stripped of her responsibility for the education of the hospital's junior doctors. "Dr Cass was not removed from her educational post but a specific project.

"A subsequent grievance raised by Dr Cass around this matter, which included Dr Cass's belief that removal from this project made her educational role untenable, was independently and thoroughly investigated and not upheld", it said.

Jeremy Hunt, the health secretary – who banned gagging orders in March – said Cass's treatment by GOSH, which was revealed by Private Eye, underlined why NHS staff should never be prevented that way from airing concerns.

"I have made it absolutely clear that 'gagging' is illegal and it will not be tolerated in the NHS. That is why any compromise agreement that is now used must state that nothing in the agreement would prevent an individual from speaking out in the public interest on issues such as patient safety," he told the Guardian.

Collins came under fire from MPs for her handling of the case of GOSH doctor turned whistleblower Kim Holt, who was put on special leave by the hospital after raising concerns over care quality.

• The headline on this article was amended on 27 June 2013 to reflect the fact that the compromise agreement between the hospital and Dr Cass came after she had raised concerns about patient safety but did not specifically mention those concerns.